FocusChina bitumen prices to remain firm in Q2 2012 on tight supply

06 April 2012 07:38  [Source: ICIS news]

By Psyche Gong

SINGAPORE (ICIS)--China’s bitumen prices are expected to remain strong in the second quarter of 2012 because of tight supply caused by heavy maintenance schedules among major producers and production cuts, industry sources said on Friday.

Seven major producers – as shown in the table below - are carrying out maintenance at their refineries in the second quarter of 2012, according sources from the companies.

Some other producers are planning to halt or lower their bitumen production because they intend to use their crude feedstock for other purposes, according to sources from the refineries.

For example, China’s biggest producer PetroChina is planning to halt bitumen production at its 700,000 tonne/year Wenzhou plant for two to three months, beginning from mid-April, a company source said.

Sinopec Zhenhai Refining & Chemical Co (ZRCC) plans to reduce its bitumen production by 42% in April to 70,000 tonnes, according to market sources.

In addition, some producers are also cutting production as strong crude prices send bitumen margins into the negative, industry sources said.

Bitumen producers are reducing production because of poor profit margins. Bitumen margins were at minus yuan (CNY) 150/tonne ($23.8/tonne) on 28 March, compared with CNY26/tonne one month ago, according C1 Energy, an ICIS service in China.

As a result, total bitumen production in the second quarter will only be about 3.41m tonnes, down by 11% from the first quarter, according to C1 Energy.

In addition, the supply of imported bitumen will stay tight in April and the following months, traders said.

South Korea, China’s biggest bitumen supplier, is expected to deliver less than 50,000 tonnes of cargoes to China in April, compared with a combined 134,607 tonnes in January-February, according to traders. March figures were not available for comparison.

This is largely because of lower bitumen supply as major producer SK Energy will start maintenance at its refineries in April, according to traders.

However, there is unlikely to be a significant increase in bitumen prices this quarter as prices have already reached a historic high and that has weighed down buying interests, said industry sources.

In addition, the difficulty in securing credit in China because of current monetary policies is limiting traders’ buying power, they added.

Latest prices from C1 Energy show that domestic heavy-duty bitumen was traded at CNY4,893-5,050/tonne ex-works on 30 March, up 15% from CNY4,300-4,350/tonne in 25 January, when prices first started increasing, according to C1 Energy.


Table: Maintenance schedule of major Chinese bitumen producers in Q2 2012

Refiner

Schedule

Capacity under maintenance (tonnes/year)

Region

PetroChina Karamay Petrochemical

10 May – H1 June

1m

Northwest China

PetroChina Qinhuangdao Bitumen

6 April – 4 May

700,000

North China

Alpha (Jiangyin) Bitumen

15 March – mid-April

700,000

Yangtze Delta

PetroChina Xingneng

15 April – end-May

400,000

Yangtze Delta

China Offshore Bitumen (Taizhou)

May

700,000

Yangtze Delta

PetroChina Gaofu

Begins in late April or early May

140,000

South China


($1 = CNY6.31)


By: Psyche Gong
+65 6780 4359



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